The Feldman File covers eBooks, publishing, new media, Internet services, consumer electronics and salsa dancing. (Okay, not salsa dancing, but it'll be interesting to see how many people looking for information on salsa dancing end up here.)

Monday, January 31, 2011

I very rarely write about politics, but political movements in the U.S. have a huge effect on the economy, and that's something that I cover. In my opinion, both the right and left wings of U.S. politics espouse very different philosophies but are being driven by the same thing: Fear of change.

The right wing, especially the Tea Party, wants to go back to a pre-New Deal period where the Federal Government's role is dramatically reduced and focuses primarily on national defense. The left wing wants to increase the social safety net. The problem for both wings is that they don't want to face, let alone deal with, the dramatic changes in the U.S. and the world over the last two decades. Here are a few examples:

In the Reagan years, the "glory days" of the right wing, the U.S. still had a robust manufacturing base. Today, the U.S. manufacturing base is thoroughly hollowed out, and our country is dependent on manufacturing in China, Taiwan, Mexico and other countries. The manufacturing jobs that we once had have largely been replaced with lower-wage service jobs or are gone entirely. High tech industries haven't come up with replacements for steel, cars, etc., and most high tech manufacturing has gone overseas.

Our primary and secondary public schools are falling further and further behind schools in other countries, but the left wing sees only one solution: Reform the existing schools. The problem is that neither administrators nor teachers are willing to make changes that jeopardize their jobs or work rules. The solution is robust competition from outside the existing school systems, in the same way that effective competition weeds out ineptly managed companies and makes the survivors better.

Our financial institutions are no longer trustworthy. The financial meltdown demonstrated that the management of most of the top consumer, commercial and investment banks was (and still is) incompetent. Our securities exchanges are dominated by programmed traders that buy and hold securities for milliseconds. Humans are no longer in control of the process, as last year's "flash crash" illustrated.

The Internet has made talent and capital global. High-quality talent in the U.S. has to compete with talent from around the world, most of which is willing to work for less money. Similarly, capital flows around the world to where it can get the best return; it's no longer limited to a single country or continent. While the U.S. is still seen as the "go-to" place for entrepreneurs, scientists and engineers around the world, it's losing its appeal as other countries grow.

Our infrastructure (roads, bridges, sewers, water and gas lines) is deteriorating at a dramatic rate. We're nearing the point where we can no longer maintain much of our existing infrastructure--it will have to be replaced.

The U.S. doesn't have the money to maintain its existing social safety net. Nor does it have the money to maintain its military at its current level. It certainly can't do both while fixing its educational system and infrastructure, and it can't rebuild its financial system on a foundation of quicksand. If unemployment levels out at 8% rather than 5%, where does the money that the formerly employed had been paying in taxes come from? If property values level off at 20% to 30% below where they were before the Great Recession, how will our schools and local governments compensate for decreased property tax revenues?

We're going to have to radically change our spending priorities. This is a daunting challenge, and it brings me back to my original point: Rather than face the real challenges, the right wing wants to go back to a time before the challenges existed, and the left wing wants to keep spending money in the hope that a miracle will occur. Both sides are afraid of dealing with where change has taken us today, and will take us in the future. Until both sides get over their fear and start dealing with the real issues, the U.S. political system will be a perfect example of "sound and fury, signifying nothing."

About Me

I spent 25 years in Silicon Valley managing and launching products for Internet, software and hardware companies. I then moved into the book industry, where I advise publishers and distributors on how best to enter the eBook market.